Investment Property - What Kind Should You Buy?

When considering what features your target investment property should have, you shouldn't rely solely on what someone else says is important. Use your own financial goals and needs for determining what to look for. However, it may sometimes be useful to consider the things that are important to other people.

For instance, Ken McElroy, author of “The ABCs of Real Estate Investing,” prefers to buy slightly larger properties,” so that they will pay for the hiring of a property manager. He simply does not wish to play that role. It would most likely be a waste of his resources to do so. By hiring a property manager, he is able to be out looking for even more investments, to make even more money.

Another thing that is an important consideration is whether or not the property is going to require being rehabbed. McElroy refuses to consider properties that are too old. Even if such a property were in good shape, which is doubtful, it will probably be missing some amenities. You wouldn’t be able to charge as much rent as with other rental units. You will have to spend more effort and expense getting the investment up to speed. Why bother with investments like that when, with just a little more effort, you can find a property that needs less repairs and will bring in more rent?

Remember how vital the location is when buying an investment property. When deciding upon your sub market, remember that most of people would rather buy than rent. So, unless it is significantly more expensive to buy in a particular area, you will have a difficult time keeping your property rented out.

McElroy also likes to target out-of-state owners who own only one or two properties in a particular city. Many times these owners do not keep the properties up to the level at which they could operate, because they originally underestimated the amount of time and effort it would take to nurture out-of-town properties. Sometimes the owners are anxious to let someone take their properties off their hands.

Whatever kind of deal it looks as though you will be arranging on a given property, be careful you don't buy something at a “good” price that is in a poor location. Remember, the only reason you are buying a property is to make money. If it is not going to make money, then NO price is a good price. It won’t going to make money if it is in a dangerous neighborhood. It is not going to make money if it is in a community with a high unemployment rate. It won’t be making money if it is in an area that is suffering an exodus. If there are no people, there are no prospective tenants.

These are some of the qualities that you should consider when looking at potential properties, and they will help you on the road to discovering what you really need in an investment property. Your focus is appreciation and cash-flow. Look for real estate investments that are in good condition and well located. Make sure your investments are where the people are and where the people want to be. If you keep what we’ve discussed here in mind, everything else will come together naturally.

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